Focus OnIn Depth

China Online Education Needs to Slow Down

The year 2020 has come to an end, and the China online education industry is still receiving much attention. This track, which was once asserted to be “a chicken feather in the end”, is not only not in decline, but also in hot. From various program titles to subway, bus stops, and even elevator advertisements, China’s online education platforms are everywhere.

Are online education companies rich? From the overall market point of view, about 70% of the enterprises in the entire online education industry are in the situation of continuous loss. However, even if there are high marketing and high losses, the future value of online education industry is still immeasurable, which also leads to the capital’s tolerance to China online education platforms.

China online education
market size of China online education form 2012 to 2022

Capitals invest more

Near the end of the year 2020, the China online education market reappears capital feast.

In late December, Yuanfudao, one of the largest online education companies in China, received US $300 million in financing from YF Capital. As the most powerful competitor of Yuanfudao, Zuoyebang followed closely and announced the completion of the E + round investment, with more than US $1.6 billion. The investors include Alibaba,Tiger Global, Sequoia Capital China, Softbank Vision Fund, Fountainvest Partners and so on.

Yuanfudao
Yuanfudao’s ads on the street

Up to now, Yuanfudao and Zuoyebang, the cumulative financing amount disclosed by the two K12 online education enterprises have reached US $2.35 billion and US $3.5 billion respectively. It is worth noting that Yuanfudao and Zuoyebang have not yet been listed, but their valuation has surpassed many listed companies and become the capital’s favorite.

In addition to the rising stars who have not yet been listed, the old listed educational institutions also frequently obtain financing. On the same day of the financing of Zuoyebang, Genshuixue also announced that the recent fixed increase financing of US $870 million has been fully put in place; TAL Education Group also announced that it has reached a private placement agreement of US $3.3 billion with and other institutions.

It is not difficult to see that in the so-called “capital winter” of the public, the online education track is very hot, the capitals keep investing more, and the online education industry has ushered in new development and challenge. In the process of traffic competition and marketing scale expansion, a large amount of capital investment has also pressed the “accelerator key” for the online education industry.

It is a basic rule strictly followed in the war that “troops and horses do not move, food and grass go first”. With the arrival of a new round of funds, the war in the online education industry will start again.

Winter vacation class is of great significance

Different from other platforms, online education mainly focuses on winter vacation classes. For China online education platforms, winter vacation classes are the battlefield that must not be missed.

First of all, China’s winter vacation has been extended. The new year is coming, all kinds of schools at all levels have entered the final stage. As the number of people infected with COVID-19 increases sporadically, the epidemic prevention and control were also intensified. The number of online education courses is expected to increase with the advance of winter vacation in many schools.

China online education platform
A Chinese student is learning on a online education platform

Therefore, the giants are stepping up investment, and the platforms are also frantically enriching blood, in order not to miss the winter vacation enrollment season. At present, the winter vacation enrollment war has begun. Zuoyebang live class launched 49 yuan Chinese and mathematics training camp course, and presented books, literacy class and other gifts; Yuanfudao also launched 30 yuan 24-hour winter vacation training course.

Secondly, the winter vacation class affects the course order renewal. The winter vacation and summer vacation are the two major enrollment seasons of online education every year, and its enrollment scale is closely related to the renewal situation in the next two or four quarters. Therefore, the annual winter and summer holiday not only has the largest marketing scale but also has intensified the war.

In addition, in 2021, the China online education market will continue to develop at a high speed, and the development space is still very large, and the major China online education platforms will also step up the layout, so the battle about winter vacation classes at the beginning of the year must be beautiful.

According to iimedia, China’s online education market will reach 404.1 billion yuan in 2019, 453.8 billion yuan in 2020 and 545.5 billion yuan in 2021.

Therefore, the online education market in 2021 will not be extinguished but will spread throughout the year. While platforms replenish ammunition, online education will be trapped in the shackles of continuous money burning.

Chaos leads to bad results

Money burning marketing has always been the industry consensus of China online education. For online education enterprises, marketing expenses are life extension expenses. What’s more, some enterprises’ marketing expenses are directly higher than the revenue expenses, so is Genshuixue(GSX). According to the financial report, the marketing expenses of Genshuixue accounted for 114% of the total revenue in the third quarter, which also made it fall into a loss for the first time since they went public.

It is not difficult to find out that online education platforms spend a lot of money on marketing, and they focus on business innovation is far less than marketing. From one-to-one to large classes, the main models of major platforms are more and more similar, and the homogenization of the online education business is becoming more and more serious. The homogenization of products will eventually lead to a price war, and the chaos of excessive marketing and vicious competition will also lead to many consequences.

First, pirated courses are rampant. In the process of the rapid development of the whole industry, the phenomenon of internal infringement also occurs constantly. Among them, courses worth several thousand yuan on the official website are only 9.9 yuan in some online stores or platforms; text materials from different platforms are integrated into “learning packages”, which can be downloaded by clicking the link.

Piracy has not only caused malicious encroachment of intellectual property rights to major institutions but also brought serious economic losses. What’s more, it has caused irreparable damage to the reputation of online education platforms.

Secondly, many China online education platforms have exploded, and online education has triggered a crisis of trust. Under the price war and large-scale marketing momentum, in order to obtain users, many platforms do not hesitate to overspend for expansion. As a result, the capital chain is broken, leading to a crisis. In October, the public opinion about the “runaway tide” of the old educational institutions’ YouWin Education just dissipated. Not long ago, Xuebajun(XUEBA100) was exposed to “bankruptcy”.

YouWin education
Youwin Education, a company with more than 1,100 stores and over 30,000 employees across China

Under the influence of the difficulty of fee refund and the running of institutions, many users have lost trust in the China online education platforms. YouWin Education and Xuebajun are lessons from the past.

In each industry, the survival of the fittest is the most basic survival law. In the process of continuous competition, capital keeps moving closer to the head online education platforms, and users are more and more attracted to the head platforms. The future is the struggle of the head platforms, and it is still unknown who will be the king in the end, but the rapid development of online education is not a good thing.

China online education needs to slow down

At the brand upgrading meeting of Genshuixue, CEO Chen Xiangdong said: “education should be slow and conscientious. Today’s fast online education will make up for tomorrow’s slow.”

CEO of Genshuixue
Chen Xiangdong, the CEO of Genshuixue

There is no doubt that the consequences of too rapid development and expansion will be made up at a greater cost in the future, either a lot of time or multiple funds. The education industry in China is slow work. For the China online education industry, it is more important that all major platforms should return to rationality and seek the sound development of the industry and itself.

First of all, return to education itself, from getting users by money to getting users by actual strength. China online education platforms should return to the essence of education, and education is a slow process. Therefore, in order to get out of the vicious circle of burning money and win more high-quality users, China online education platforms should take the high-quality and efficient education serves as the standard, improve the teaching quality and make public praise.

Secondly, make differentiation and improve the innovation ability. Business homogeneity is undoubtedly an early warning signal. In the process of competition, enterprises without innovation ability and unique advantages will be eliminated. Therefore, more funds for innovation and optimization will further deepen the moat of enterprises and save more chips for future competition.

If they don’t work hard on themselves and blindly seize the market quickly, the unstable foundation of the platform will inevitably suffer the disaster of face to face.

Education is a process of teaching and educating people. In the long run, only enterprises adhering to the long-term principle can continue to win. Whether it is to increase innovation or improve the quality of teaching, it is a long-term process, and also a problem that every China major education platforms must face.

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Jack Chan

Pre Editor in chief of FirmKnow News.
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